In addition to the emotional toll that a divorce can take on all parties involved, the process can also become very costly, particularly when you factor in attorney and court fees, as well as alimony and child support. If you and your spouse have decided to get a divorce, it is wise to create a pre-divorce budget so that your finances are protected after the divorce. A skilled divorce lawyer can assist you with this process, ensure that your legal rights are protected and secure the financial settlement you deserve.
Why Is It Important to Collect Financial Information as Soon as Possible?
Part of the divorce process involves dividing the marital property, which includes all assets and debts that were acquired over the course of the marriage. New Jersey is an equitable distribution state, which means that the assets, earnings, and debts that were accumulated during the marriage are divided equitably, but not necessarily equally. Before the marital property can be distributed, you and your spouse must thoroughly review all assets, expenses, and debts. Collecting this information early in the divorce process will help the process run as smoothly as possible and ensure that you reach the best possible financial outcome.
What Financial Information Should I Have Available?
Reviewing, collecting, and organizing financial information can be an overwhelming task. However, as you begin the divorce process, it is important that you collect as much of the following information as possible:
- Assets: This is any type of resource that has economic value, and can include any of the following:
- Retirement and pension accounts
- Bank accounts
- Investment properties
- Life insurance policies
- Business assets and income
- Antiques, jewelry, and other items of value
- Stocks, bonds, CDs, and other investments
- Expenses: This can be complicated since expenses can change from month to month. However, it is perfectly fine to estimate your monthly expenses by closely reviewing your expenses from the past twelve months and calculating your average monthly costs. Consider referring to the following list of common expenses:
- Mortgage, with principal and interest payments separated
- Homeowner’s or renter’s insurance
- Health insurance
- Medical costs not covered by health insurance
- Groceries and dining out
- Education and tuition
- Vehicle expenses
- Entertainment and vacations
- Life insurance
- Charitable contributions
- Debts: Most couples take on some form of debt over the course of their marriage, which the court will evaluate when determining how the marital property will be distributed. If there is debt that one spouse accumulated before the marriage, like a student loan or a home that they owned, this will be considered separate property and not subject to the equitable distribution of property. Gather information about the following types of debt, even if it is in your spouse’s name:
- Mortgages or rent
- Credit card debt
- Property liens
- Car loans
- Student loans
- Tax debts and liens
- Other debt that was acquired over the course of the marriage
- Child support from a previous marriage
What Are Some Effective Pre-Divorce Budgeting Tips?
Whether you have been the person responsible for paying the bills and managing the household income, or the mere thought of checking the bank balance stresses you out, it is important to create a pre-divorce budget. Consider the following tips as you start this process:
- Keep track of your spending. Track your expenses. Look at your monthly spending for the months leading up to your divorce and make copies of all important financial documents related to your home, children, vehicles, investment accounts and other assets, as well as pay stubs and tax returns from the last two or three years. Keep these documents organized and in a safe place.
- Check your credit. If you and your spouse share a credit account, apply for your own credit card. Request a credit report so that you know your credit score. You can get a free report from Annual Credit Report.
- Separate your bank accounts. If you have joint checking, savings, or investment accounts, open new accounts that are in your name only.
- Save all passwords and account information. Ensure that you have all passwords for bank accounts, investment and retirement accounts, mortgages saved and protected so that other people cannot access them.
- Consult with a financial advisor. Seek financial advice from an experienced financial advisor as soon as possible. They will work closely with you to ensure that you are financially prepared for the divorce process, and life after divorce.
- Curb your spending. In the weeks or months leading up to the divorce, be frugal so you can put away as much money as possible.
- Be prepared for a change in your standard of living. Once your divorce has been finalized, you may not walk away from the marriage with everything you hoped for, so consider what is most important to you and choose your battles.
- Try not to get overwhelmed. Planning for the financial aspects of a divorce can be overwhelming, but if you focus on one task at a time, it will be much less stressful. Make a to-do list, stay organized and ask for help when you need it.
- Try to remain civil when negotiating finances. The more you and your spouse are able to cooperate with each other and disentangle your marital property with as little fighting as possible, the less your divorce will cost overall.
How Can I Protect My Finances After the Divorce Has Been Finalized?
Even after your divorce has been finalized, there are proactive steps you can continue to take to ensure that your finances are protected, including the following:
- Figure out your post-divorce income. There are a number of factors that will impact your income after your divorce has been finalized. If you will be responsible for making child support and/or spousal support payments, this will have a significant impact on your income. In addition, if you are a stay-at-home parent, and your spouse is having trouble meeting their support obligations, you may need to get a job in order to support yourself and your children.
- Start saving for retirement. If you are not already doing so, start investing in a retirement plan. Retirement accounts offer a range of benefits, including income tax reductions from contributions and tax-deferred growth. If your shared retirement assets are divided in your divorce agreement, you may want to consider requesting a Qualified Domestic Relations Order (QRDO) as part of your divorce settlement.
- Consider selling the marital house. It can be difficult to walk away from the house that you raised your family in, but it is an important step towards moving on and taking charge of your finances after your divorce. If your spouse is not interested in keeping the house, you may consider buying them out if you can afford to do so. Otherwise, you can sell the house, split the profits, and make a fresh start in a new home.
Freehold Divorce Lawyers at Lyons & Associates, P.C. Assist Clients with Every Aspect of the Divorce Process
If you and your spouse are getting a divorce, the Freehold divorce lawyers at Lyons & Associates, P.C. will guide you through every step of the process. To schedule a free, confidential consultation, call us today at 908-575-9777 or contact us online. Located in Somerville and Morristown, we serve clients throughout Somerset, Woodbridge, Morristown, Parsippany, Rockaway, Short Hills, Chatham, Randolph, Madison, and Morris Plains.